- The Washington Times - Saturday, September 4, 2004

On Aug. 26 the Bureau of the Census released its estimate of poverty in the United States for 2003.

The poverty rate — the proportion of the population below the officially defined poverty threshold — rose from 12.1 percent in 2002 to 12.5 percent in 2003. The data for 2004 won’t be available for another year. However, based on available economic statistics for this year that are predictors of poverty, an informed judgment can be made, if not about the rate itself, at least whether it’s rising or falling.

As one might expect, the poverty rate is correlated with the ups and downs of the business cycle. The rise in measured poverty last year in part reflected the delayed recovery in the job market following the cyclical upturn in late 2001.

Besides employment, key variables that affect income and hence the poverty data include wages, economic growth and unemployment. Changes in legislation, welfare programs and economic policy can also have an impact.

Looking at the data, real gross domestic product (GDP) in the first two quarters of this year averaged a more than 3.6 percent increase at an annual rate, or more than a half point over 2003. Payroll employment last year declined 410,000, while in the first eight months of this year jobs were up by well more than a million. The unemployment rate, as officially measured, rose last year, from 5.8 percent in 2002 to 6 percent in 2003. This year it has declined to a post-recession low of 5.4 percent in August.

And while the earnings of production workers have been weak so far this year, overall real per-capita disposable income was up 2.8 percent in the first half of this year over the same period a year ago. This gain compares with a decline in the first half of last year from the first half of 2002, and is more than twice the increase for the full year 2003.

On the negative side, federal temporary unemployment compensation was not extended this year. However, any resulting income loss has been dampened by the increase in jobs and declining unemployment and is unlikely to be sufficient to offset the impact of other positive economic measures.

All in all, it seems safe to predict the poverty rate so far this year has declined. And given the consensus outlook for continued economic growth for the rest of this year, it’s likely the rate for the full year will show an improvement over 2003.

The larger issue of the official definition of poverty is another matter. That the definition has warts has been well documented and requires a separate discussion. It should be mentioned that the official definition is determined by the President’s Office of Management and Budget, not by the Census Bureau, which does a commendable job of estimating and reporting the numbers.

It’s unfortunate that the Census Bureau was accused of politicization when it reported the 2003 poverty data a month earlier than last year. Prominent Democrats in the heat of election frenzy suggested the data were released early to distance the bad news from the November election or that the report was deliberately put out while people were on vacation.

Since when is more timely data cause for criticism? Low blows indeed. The Census Bureau and other federal statistical agencies have always played it straight and would steadfastly resist politicization from any source.

John Kerry has also spoken, or misspoken, about the poverty data. In his acceptance speech at the Democratic National Convention July 29 he said the number of families living in poverty has risen by 3 million in the past four years. At the time of his remark, the latest official poverty data available were for 2002. If he meant the most recent four years, which takes it back to 1998 in the middle of President Clinton’s second term, then he would be wrong. The number of poor families in 2002 was 7.2 million, the same as in 1998. If he meant the four years of President Bush’s term, he would have to be prescient to foresee two years of data before they were or could be estimated. It appears Mr. Kerry was mistaken.

Alfred Tella is former Georgetown University research professor of economics.

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